Most smoking initiation occurs during adolescence, with few starting after high school graduation (DHHS, 1994). Every day, about 3,600 U.S. youth ages 12-17 try their first cigarette, while 1,100 youth in this age group become daily smokers (CDC, 2009). Youth who start smoking at younger ages are more likely to become strongly addicted to nicotine (CDC, 2006). By deterring youth smoking initiation, higher cigarette taxes and prices are an effective way to achieve long run reductions in smoking and its consequences.

Some recent studies have considered the direct and indirect influences of price on youth smoking, focusing on some of the factors that economic theory implies would lead to greater price sensitivity among youth:

- The relatively limited incomes of most youth, implying that changes in the prices of any product they consume will have a greater impact.
- The importance of peer behavior, suggesting that changes in the smoking behavior of some youths will result in changes in the smoking behavior of their peers.
- The relatively shorter smoking histories of younger smokers, suggesting that they may be less addicted and quicker to respond to price changes than their older counterparts.
- The greater propensity to discount the future among youth, implying that they will respond more to increases in the more immediate costs of smoking (such as a tax and price increase) than to increases in the future costs of smoking (such as its health consequences).
- Other indirect channels through which tax and price can influence youth smoking (e.g., through their impact on parental and other adult smoking).

The 1994 Surgeon Generals report described smoking initiation among youth as a five-stage process, moving from never smoking through a preparatory stage and then into trying, experimentation, regular smoking, and addiction. A few studies using cross-sectional data have explored the differential effects of price on this uptake process, generally concluding that price has its greatest impact on more regular smoking among youth. Liang and Chaloupka (2002), for example, find that higher cigarette prices reduce youth smoking at all levels of smoking intensity, but that they have their greatest impact on smoking at the heaviest levels.

More recent studies have used longitudinal data on youth to focus on the effects of price on youth smoking initiation and uptake. Tauras et al., 2001, using longitudinal data from the 1990s collected as part of the Monitoring the Future project, estimate that a 10 percent increase in price would reduce the initiation of any smoking by 1-3 percent, but would reduce the initiation of daily smoking by 8-12 percent and of heavy daily smoking (half a pack or more per day) by 10-14 percent. In his subsequent research on smoking escalation among young adults, Tauras (2005) reports that higher cigarette taxes and prices would be similarly effective in keeping young adults and adult smokers from moving to a higher level of consumption. In the earliest research examining differences in the effects of cigarette prices on smoking among different age groups, researchers concluded that smoking among 12- to 17-year-olds was about three times more sensitive to price than smoking among adults (Lewit et al., 1981), while smoking among young adults, ages 20 to 25, was about twice as responsive to price as overall adult smoking (Lewit and Coate, 1982).

While a few studies have found no differences in the sensitivity to price of smoking among different age groups (e.g., DeCicca et al., 2002), most have confirmed that price has a greater impact on smoking among youth and young adults than it does among older adults (Chaloupka, in press). Similarly, a smaller number of studies demonstrate that youth smokeless tobacco use is sensitive to price (Tauras et al., 2007).

In a 2005 study, Powell et al. assess the extent to which cigarette tax and price increases lower youth smoking indirectly through reductions in peer smoking. They conclude that more than one-third of the overall impact of price on youth smoking prevalence is accounted for by these peer influences. Similarly, Powell and Chaloupka (2005) consider how much of the impact of price on youth smoking comes through the reductions in parental smoking that result from cigarette tax and price increases. As with peer influences, they find that the indirect effect that works through parental smoking accounts for a significant share, about one-fifth, of the overall effects of cigarette prices on teen smoking prevalence.